Canopy Growth Corporation

Good morning and welcome to Canopy Growth's first quarter fiscal 2020 financial results conference call. Canopy Growth issued after financial markets closed on August 14, 2019, a news release announcing its financial results for the first quarter fiscal 2020, ending June 30, 2019. This news release is available on Canopy Growth's website and has been filed on CDAR. On the call this morning, we have Mark Zekulin, Canopy Growth Chief Executive Officer, and Mike Lee, Canopy Growth Executive Vice President and Chief Financial Officer. At this time, all participants are in a listen-only mode. Certain matters discussed during today's conference call or answers that may be given to questions could constitute forward-looking statements. Actual results could differ materially from those anticipated. Risk factors that could affect results are detailed in the company's annual information form and other public filings that are made available on CDAR. During this conference call, Canopy Growth will refer to supplemental non-GAAP measure adjusted EBITDA. These measures do not have any standardized meaning prescribed by IFRS. Adjusted EBITDA is defined in the press release issued yesterday as well as in this period's management discussion, an analysis document that is filed on CDAR. Please note that all financial information is provided in Canadian dollars unless otherwise specified. Following prepared remarks by Mr. Zakoulin and Mr. Lee, the company will conduct a question and answer session during which questions will be taken from analysts. To ask a question at that time, please press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press the pound key. I would now like to turn the meeting over to Mr. Zuccon. Sir, please go ahead.

Thank you, Carol, and good morning, everyone. So, as usual for Canopy, I'd like to begin the call with a brief summary of our objectives as a company and then speak to our execution as it relates to those objectives. I will also discuss how that execution, in turn, translates into our financial performance and hit on our broad expectations heading into the future. I will warn now that you can expect a little bit more detail than we have historically given, for better or worse. After I speak, our CFO Mike Lee will provide a more detailed overview of the financial performance of our business. And finally, as mentioned, we look forward to taking any questions you may have. On that note, I will add that Rade Kovacevic, Canopy's president, is also here and will be available to participate in the Q&A session. So, what has Canopy been doing? As a first objective, we are focused on laying the foundation for dominance in an emerging global opportunity. To us, this means developing intellectual property, building brands, building international reach, and ensuring scaled production capability for current and future products. It means having a formula and level of credibility to ensure smooth and efficient expansion into new product forms, markets and channels. But also, as a second objective, we are fixated on the process of evolving from builders to operators over the remainder of this fiscal year, meaning that as our expansion program comes to a close in Canada, and as new value add products become the market in Canada, we demonstrate a sustainable, high margin, profitable Canadian business. The ambition of our first goal impacts the speed at which we achieve our second goal. Canadian headquarters resources serve not just our Canadian operations but our global ambition. But both objectives are equally important and both will be achieved. With that said, I will use the remainder of my time to go over each of those in some detail. Firstly, developing intellectual property. During Q1, Canopy filed 56 patent applications across its various R&D areas, including several related to pre-roll joint production, cannabinoid isomerization, whatever that means, vape oil and vape devices. Together with the patent assets acquired from C3, This Works, and Keyleaf, Canopy's patent portfolio has increased to 110 patents and 270 patent applications. So why is this important to us? Consider growing. Growing in a greenhouse to sell dried flower is great. Dried flower sales will always be a core part of any market. But growing protected, specialized genetics bred for specialized purposes, driven through efficient patented extraction technology, and put into IP protected delivery formats like beverages or vape products is even better. Or consider market development. Selling medical cannabis in Canada through what is essentially a special access regime is great. The model works and a strong brand and team like Spectrum Therapeutics can differentiate itself and make money. But selling a registered Differentiated clinically proven medicine produced to GMP standards and covered by insurance programs changes the money-making equation exponentially. These things take time and money and unique expertise that only a few companies like Canopy have. But each person on this call has seen the speed at which this market evolves. Canopy will bring this future forward faster and better than anyone else through its investments in research, intellectual property, and clinical programs. Second, brands and new product formats. The program with the greatest potential to drive the overall size of the Canadian recreational cannabis market is our multi-year effort to develop unique, high-margin cannabis consumer products. To date, we have not, for competitive reasons, revealed significant information about these products. With this call, we will begin revealing some information, though of course still only at a high level. On Bates, our market research identified many designs and functional limitations of current devices, from battery life to device safety, all the way down to how a device does not remain in place when you put it on a flat surface. We believe that most of the products that would be brought to market would be licensed versions of products that the market was already familiar with with limited differentiation. We have deliberately taken a different path. Over two years ago, we started developing our strategy for vase and how we wanted to enter this competitive market. As the world's largest canvas company, we have the resources to develop better vase products that will offer the market something truly differentiated. We have the added benefit of being an end-to-end, vertically integrated company, and nobody will be able to replicate this integration like we have as we develop supporting proprietary technologies. Our technology team has come up with new ways to address many of the device design and functionality limitations that our market research has identified. Not only do our devices address these limitations, they add functionality that elevates the user experience and brings the industry into a new world of technology innovation. In an effort to protect the many innovations in our devices, we have filed many tens of patent applications covering unique features, functionality, and device design. In December 2019, we will be launching over 15 new SKUs related to our vape technologies. As we get closer to unveiling the new products, we'll provide full details surrounding the different device options, cartridge formats, strain availabilities, and flavor profiles. On beverages, we have of course spoken more openly about our belief in cannabis beverages becoming a new consumer product category. We believe that high-quality cannabis beverages that offer sophisticated taste, Thank you for joining us. Brands, Packaging, Taste Profiles, Strengths, and Formats of the Cannabis Beverage Products that we will be bringing to market. And of course, occupying a former Hershey Chocolate Factory, you can expect a great lineup of Bean to Bar Chocolate Products. Our existing brands will leverage these new formats as line extensions, building on the brand equity and customer affinity that we have already created. In addition, we have created Format-specific brands with unique value propositions that have a clear focus on their respective formats and consumer preferences. Moving on now. Thirdly, let me speak to our international reach starting with the closest opportunity, the United States. The focus that we have had for some time in Canada is now equaled by our focus on the CBB and future THC markets in the United States. We now have over 70 staff in place in the U.S., including most of our senior leadership, and our Canadian headquarters team has dedicated more and more time and resources towards this next opportunity. On the THC side, we are very pleased that Canopy was able to close the unprecedented and historic arrangement with Acreage Holdings that will see Canopy acquire all of the shares of Acreage when the production and sale of cannabis becomes federally permissible in the United States. With the arrangement now closed, Akerage is moving forward with plans to leverage our intellectual property. As Akerage communicated on their own conference call yesterday, they plan on opening Tweed and Tokyo Smoke branded dispensaries going forward. And to that end, expect to open several Tweed dispensaries this fiscal year. Similarly, with respect to medical cannabis products, Akerage anticipates undertaking a national rollout of Spectrum Therapeutics branded products in 2020. On the adult use side, While continuing with their current brands, Acreage relies Tweed Branded Products as a mainstream product line rolling out in calendar 2020. With the brands will also come the know-how from Canopy to produce these products at scale. And while Acreage does its thing, Canopy is squarely focused on CBD. Since January of this year, our team has been very active developing a range of high-quality CBD products and brands. and securing the production resources necessary to bring them to market by the end of this fiscal year. Our accomplishments in these efforts are numerous. We have developed a broad set of CBD products that include skin care and cosmetics, topical creams, bait products, beverages, edibles, oils and soft gels. Our team is developing, in the context of current regulatory environments, our targeted product marketing, advertising and branding programs for these products. and we are on track to reveal our CBD products this fiscal year. Investors will recall that in Q1 we announced the acquisition of skincare and sleep solution company This Works. Today we are leveraging our investment in This Works to ready one of our new CBD product lines, a range of CBD infused skincare and sleep solutions. Our team has been working since this past January to identify and contract a robust Scalable and outsourced supply chain to get CBD products into the market by the end of this fiscal year. Working with American farmers, we have thousands of acres of hemp planted in the United States. In addition, our team has already procured hemp biomass and processing capabilities for the production of CBD for our product launch. Our supply chain will be augmented starting next fiscal year by corporate assets including extraction and production resources at our facility in Kirkwood, New York as well as additional manufacturing facilities for producing vape and beverage products in select locations in the United States. We have already begun work on these facilities, though locations have not yet been announced. To stand up a new CBD business in the United States, we have made significant free revenue investments in building a strong team. Our team includes cultivation management, logistics, manufacturing, processing, sales, marketing, and of course, back office support and finance IT and human resources. Over the past two quarters, we've established offices in California and Colorado and will soon be establishing offices in Illinois and New York. We are currently involved in high level discussions with key retailers in the United States, including being constructively involved with them as we collectively navigate the regulatory process. These investments in the US Thank you for joining us today. Late in the first quarter of this fiscal year. Our Spectrum Therapeutics team is working towards full marketing and sales integration with C3 by the end of the calendar year. Our C3 sales team of 30 experienced medical sales professionals will by the end of this fiscal year be fully integrated into the existing Spectrum Therapeutics business, representing the largest cannabinoid medicines company in Germany with the highest healthcare provider reach of any organization in the medical cannabinoid industry. Our team has made significant infrastructure improvements that by the end of this month will allow for increased flow of product into European markets including Germany, Poland, Czech Republic, and the United Kingdom. This includes significant increases in prepack and fulfillment capacity to ensure rapid product flow into the pharmacy channel. On the supply side for Europe, our state-of-the-art 300,000 square foot greenhouse facility in Udense, Denmark Thank you for joining us today. have all shifted from market building to an emphasis on commercial sales. To that end, we have exported almost 1,000 kilograms or kilogram equivalents of dried flour, oil, and soft-shell products from Canada since April 1st. To reiterate, the ramp-up of sales teams and operations across all of these continents remains just at the inflection point between pre-revenue ramp-up and commercial sales with these investments and costs reflected in our financial numbers. Fourth, and lastly, I will speak to our scaled production capacity, which naturally leads into an overview of our performance in the first quarter of this fiscal year. At the outset, there are a number of things we are proud of that are worth noting, including the growth of our flour, oil, and soft-shell sales in the medical market, strong growth in dry flour sales in the Canadian recreational market, the sale of over 1.3 million pre-rolled joints, proving the value of the automated machines that we have designed in-house and the significant increase in the quantity of cannabis harvested during the quarter with over 70% of that in high THC strains. At the same time, as I mentioned at the start of the call, we recognize that this year is an inflection point between completion of our ambitious national ramp-up and all the investments that come with that and the need to move into optimized, efficient, high-margin business performance. To that end, we've been focused on improving the supply of high THC flour products, utilization of assets and operational efficiencies as we ramp up, our manufacturing throughput, and ensuring the continuity of supply of CBD only products. While I will discuss our progress on these items momentarily, it is worth pausing to mention some of the macro variables at play in Canada which we are watching very closely as I'm sure you are. These big picture events are increasingly relevant to our performance today and through the remainder of the fiscal year. Canopy built an ambitious sales and operations structure in order to succeed in a thriving Canadian market and we have to ensure that overall market growth in Canada continues and accelerates. The company looks forward in particular to the successful launch of new canvas formats and an acceleration in store openings across the country. Today, both Ontario and Quebec, Canada's two most populous provinces, have one store for every 595,000 and 495,000 people respectively versus a saturation rate in California, for example, of one store per 10,000 people. As such, we applaud announcements by both provinces to license further retail locations and are signaling today that we believe the sector is ready for even more stores. Canopy will continue to examine alignment of its strategy to market dynamics as the Canadian retail landscape unfolds, but remains confident in its Canadian plans today, the long-term potential of the Canadian market and Canopy's positioning to succeed as that market develops. Having said that, let me get back to our progress operationally. To increase sales of high-velocity flower products, we have now hit an annual run rate of over 160,000 kilograms per year, while continuing to bring additional growing capacity online. We have also brought an additional two automated packaging lines online to increase throughput, with a third coming online later this month. To increase supply and in turn sales of pre-rolled joints, we are now operating five days per week, 24 hours per day. We have three automated lines in place and operating, and have moved production from a temporary setting to the recently licensed 175,000 square foot advanced manufacturing building, bringing operational efficiencies. To ensure that we have more than adequate supply of extraction inputs for the next generation of value add high margin canvas products, we've obtained our processing license for our large scale continuous extraction system in Aldero. Estimated to be online in Q3, with extraction throughput more than capable of supporting our VC operations. We have also retrofitted the QV Life Sciences facility in Saskatchewan, a company with over 50 years of business experience in the extraction industry. This facility is expected to be online by early Q3 and is conveniently located near our hemp farming and outdoor cannabis operations in the province, with capacity to extract approximately 5,000 kilograms of hemp or cannabis per day. To ensure we have consistent supply of CBD products across both medical and recreational markets, we will be able to leverage the 900 metric tons of hemp biomass we harvested from 4,000 acres last fall and extracted at the Key Leaf Life Sciences facility this fall with an expected yield of thousands of kilograms of pure CBD. We will also further increase hemp extraction with a planned harvest of an additional 5,000 acres of hemp this fall. We also continue to invest in the development of new intellectual property related to canvas production, processing technologies, and plant genetics. We are now squarely focused on driving demand for our brands and our current and future value-add products in the Canadian recreational market. This includes extensive training programs with retailers across Canada and ensuring we bring high-demand CUD SKUs to market. It also includes communicating to provinces that our supply can now see current demand through the existing retail platform, providing confidence to expand the number of retail locations being licensed in order to create further market demand. Next, I would like to discuss the readiness of our facilities and people to produce the next generation of new value-add consumer cannabis products. During our last conference call, we identified a number of milestones that we were expecting to achieve on the path to commissioning our new bottling plant. and we've achieved those milestones. The license application for the beverage manufacturing facility was submitted on time on June 28th. Processing skids, large 20,000 gallon tanks and piping equipment began arriving in July as planned. Bottling line systems deft for facility have begun completing factory acceptance testing in July with full installation and turnover to operations expected by late October. Automated systems related to the filling and packaging of our vape products are undergoing testing during August and September with delivery to site and installation beginning later this month and are on track to be turned over to operations by October. The necessary vape filling and packaging rooms have also already been licensed by Health Canada. And lastly, a reminder that automated systems related to chocolate manufacturing are already on site and qualified with the associated rooms already having been licensed by Health Canada. With critical equipment on site, equipment qualification well underway, and a capable and experienced operations team in place, we remain confident that we will begin producing high quality beverage, vape, and edible products in the third quarter of fiscal 2020. So in summary, as I hope is clear from this call, our strategy has not changed. We will continue building capacity in Canada, the United States, Europe, and beyond. Our commitment to build out our CBD platform in the United States and to acquire acreage when a triggering event occurs has not wavered. Our commitment to research and the incredible potential of the medical market has not changed. Building organizational scale, investing in product research and development, and bringing value-add consumer products and medical therapies to market remain high priorities even though these investments have a meaningful impact on our short-term performance. This is how we will create the most shareholder value over the medium and long term in an increasingly complex and competitive global sector. However, we are well aware that our business will, in the future, be increasingly judged by financial metrics, including achieving positive earnings in our consolidated corporate P&O. Based on our current view of the growth of our markets, including distribution, retail, and the coming expansion of our product offerings, we expect that Canopy's net revenue will achieve a $1 billion run rate by the end of the fourth quarter of fiscal 2020. Further, Canopy is committed to its Canadian business delivering positive adjusted EBITDA on a quarterly basis within fiscal 2021. Still further, Canopy's consolidated operations are forecast to deliver positive, adjusted EBITDA on a quarterly basis within fiscal 2022. Finally, we are aligned with Constellation Grants in the expectation that our consolidated operations will begin to deliver positive net income in the median term, that is, within three to five years. And last of all, before Mike continues with a more detailed discussion of our Q1 performance, I would like to provide an update on the company's current leadership transition. As you all know, on July 3rd, we announced a leadership change that saw Bruce Linton leave the company, myself move from my role as president and co-CEO to sole CEO, and Rade Kovacevic become president. Additionally, we announced that I have made the decision to leave Canopy once a suitable CEO is found, one that can embody all of the vision and ambition that Canopy has, while bringing fresh energy and experience to drive this incredible company to the next level. I can confirm that the company has retained recruiter hydrogen struggles and that this search is now well underway with several exceptional candidates already identified. We expect to complete the transition process within the next several months. This concludes my long remarks and I will pass the call over to Mike to review our first quarter fiscal year 2020 financial results. Mike, please go ahead.

Great, thanks Mark. Good morning everyone. I will begin my remarks with a brief review of our top line performance. During the first quarter of fiscal 20, we generated net revenue of $90.5 million on net cannabis revenue of $71.7 million. This includes sales of 10,549 kilogram or kilogram equivalents, which is up 13% versus Q4 of fiscal 19, or up 291% versus Q1 of fiscal 19. Looking at revenue by channel, gross revenue in the Canadian rec market totaled $61 million, including $50.4 million in product wholesale to the provinces and $10.6 million of revenue from our retail stores. Our gross revenue for the rec channel includes an $8 million provision for returns that I will speak about in more detail in a few minutes. Gross revenue from our global medical channel reached $23.6 million including $13.1 million of gross revenue from our Canadian medical channel and $10.5 million from our international medical channel. As you will likely recall, we recently acquired C3, which accounted for $8.8 million of our international medical channel sales. Looking at our medical channel trends, the Canadian medical business rebounded in Q1 with growth of 13% driven by increased supply that Mark highlighted earlier. With continued improvements to our export process and higher inventory levels available for export, we expect International Medical to grow in coming quarters. We also have other revenues of $18.8 million, which includes revenue from stores in Bickel, This Works, as well as revenue from our clinics and merchandise sales. And now a quick look at volume sales. I would like to highlight the following. During the quarter, we sold 9,060 kg and kg equivalents into the REC channel, which is up 14% versus Q4. Of this, 7,673 kg were dried cannabis, which is an increase of 94% versus Q4 of F19, and we also sold 1.3 million pre-rolled joints, which represented 16% or 9.7 million of total REC cannabis revenue. In the global medical channel, we sold 1,489 kilogram and kilogram equivalents, of which 46% was soft gels and oils, and this is up from 17% in the first quarter of fiscal 19. Now back to the revenue provision that I discussed earlier. Being a short nine months into this new adult use market, we, along with our provincial and territorial agency partners, have been working to improve the overall supply chain for the REC market. We're working hard to streamline business processes with a focus on improving fill rates and reducing out of stocks, while also improving inventory turnover, especially as the sector grows. And working with the agency partners, we build forecasts into our production plans, which consider a number of factors, including the pace of new store openings. And being an operator of physical retail stores ourselves, we understand that the pace of store openings is affected by a variety of factors, Most notably, the time required to complete the retail permitting process and licensing requirements. In our detailed review of wholesale inventories at the end of Q1, we concluded that there was a modest surplus of oils and softshells in certain locations, and as such, we concluded that an $8 million provision for returns was necessary. This charge has been reflected in reported gross revenue for oils and softshell caps in the REC market. Taking all of this into account, Net revenues for the first quarter of fiscal 20 are largely in line with Q4 fiscal 19, and with our latest harvest of over 40,900 kilograms, we expect to return to growth in the next quarter. Now I would like to turn my attention to gross margin. As a reminder, the cost of sales includes the impact of operating costs of cannabis cultivation subsidiaries not fully utilized, including specific zones of our Alder Grove, Mirabelle, and Niagara greenhouses as well as costs associated with developing vape, edible, and beverage products for which markets will be available later this calendar year. Gross margin in the first quarter of fiscal 20 before the IFRS fair value impacts was $13.2 million or 15% of net revenue. Comparatively, Gross margin in the first quarter of fiscal 19 was $11.1 million, or 43% of net revenue. The lower gross margin percentage in the first quarter of fiscal 20 was primarily attributed to $16.2 million of operating expenses for facilities not yet cultivating or processing cannabis, producing cannabis-related products, or facilities that had underutilized capacities. In my remarks during our prior call, I highlighted that startup costs related to our advanced manufacturing building and new bobbing plant would continue to serve as a modest headwind in coming months. In the first quarter, we incurred expenses of approximately $1 million related to the commissioning of our advanced manufacturing building. Excluding these costs associated with underutilized assets and non-recurring expenses, The gross margin before the fair value impacts in cost of sales and other inventory charges was $29.4 million, or 32% of net revenue. With utilization increasing in these facilities, we expect our operating costs to normalize in the next several months as we work through seed to sale, and we expect gross margins to surpass 40% by the end of the fiscal year. Let me briefly speak about operating expenses. Sales and marketing expenses were $45.1 million in the quarter, reflecting increased staffing as we build out our network of Tweed and Tokyo Smoke branded retail stores in Canada, increased staffing in our sales and marketing functions to support both our domestic and international markets, and investments aimed at driving brand awareness and educating consumers through various marketing, but we are also making investments ahead of revenue to prepare for the second phase of recreational cannabis as well as CBD products in the United States, both of which are expected to launch later this year. Research and development expenses grew to $8.5 million in the quarter, reflecting our investments in vape, plant genetics, applied technology, as well as the cannabis-based medical therapy clinical research. And we expect our R&D investments to expand further with our recent acquisition of Beckley Research and the associated clinical trials that are underway. G&A expenses grew to $62.3 million as we have built out our global team, back office functions, information technology, human resources, and legal. Investments in acquisition-related activities totaled $13.2 million in the quarter and included investments related to implementing the plan of arrangement with Acreage Holdings and closing acquisitions of C3 and This Works. Share-based compensation was $87.3 million and was down $5.8 million from Q4 due to reduced expenses on acquisition milestones. Moving beyond operating expenses, I would like to spend a few minutes on other income and expense. We noted in the subsequent event note in our fourth quarter in fiscal year 2019 press release associated with the approval of certain modifications to the investor rights agreement with Constellation Brands as well as terms of existing warrants that Canopy Growth would record a material non-cash charge during the first quarter of fiscal 20. As I highlighted during our previous conference call, and as previously addressed in the management information circular related to the acreage deal, we and Constellation Brands agree to a modification to the investor rights agreement with Constellation Brands. And the new investor rights agreement has two modifications related to the exercise price of their warrants as well as the expiration date of their warrants, both of which are subject to fair value adjustments. The fair value adjustments The accounting of which is detailed in Note 25 of the Consolidated Financial Statements and recorded through the Consolidated Statement of Operations resulted in a non-cash charge of $1.2 billion. Going forward, the revised Tranche A and B warrants will be accounted for as equity instruments and will not result in subsequent remeasurement in the P&L. In addition, the Tranche C warrants will be classified as a derivative liability for which the fair value will be nil, given that they are based on the five-day volume-weighted average price, or the VWAP. The remaining expense and gain items included in net total other expenses, the majority of which are non-cash, are further highlighted in our MD&A for the three months ended June 30, 2019. The acreage arrangement provides Canopy with the option to acquire 100% of the shares of acreage with a requirement to do so once U.S. cannabis production and sale is federally permissible in the United States. In exchange for this option, Canopy has made an upfront payment to acreage shareholders that total $300 million USD, which will be recognized as a financial asset on Canopy's balance sheet. Subsequent changes in the fair value of this option will be recognized through our consolidated statement of operations and will be disclosed in our quarterly report. The fair value accounting of the acreage option, which will add a non-cash expense or gain into other expenses, will introduce some volatility into our statement of operations. Now let's briefly review adjusted EBITDA, our supplemental non-IFRS measure for the first quarter of 2020. Adjusted EBITDA is defined as earnings from operations, as reported, before interest, tax, depreciation, and amortization, and is further adjusted for non-cash items such as stock-based compensation expense, as well as accounting for biological assets and inventories and acquisition costs. and we believe adjusted EBITDA is a useful financial metric to help investors understand the operating performance of our business before the impact of investments and acquisitions and income taxes and non-cash fair value measures. Our adjusted EBITDA for the quarter amounted to a loss of $92 million as compared to a loss of $22.5 million in the comparative period last year. From the beginning, our company has had different aspirations. Thank you for joining us. consumers that have not yet tried cannabis for the first time. And to accomplish this, the scope of our activities and investments will continue to be greater. We've invested in the development of infrastructure to produce what we believe will be a new category-defining cannabis beverage. As Mark highlighted earlier, we have invested in a range of new feature- and function-rich vape products. We're standing up a new CBD business to start in the U.S. Thank you so much for joining us today. Hence, we've recently expanded our adjusted EBITDA reporting to include a breakout of the existing unchanged metric into the three subcategories as follows. Number one, adjusted EBITDA related to corporate operations and corporate overhead, and this will include our Canadian and European results. Adjusted EBITDA related to non-operating or underutilized facilities, which contains the costs that we often cite, and our explanation and reconciliation of reported gross margin to normalized gross margin and adjusted EBITDA related to strategic investments and business development, which includes global research and development and global spending beyond Canada and Europe. The breakout of these measures are captured in our press release and our MD&A. And for Q1, our adjusted EBITDA on core operations and corporate overhead was a loss of $57.8 million. Our adjusted EBITDA on non-operating and underutilized facilities was a loss of $16.2 million. And our adjusted EBITDA on strategic investments and business development was a loss of $18 million, totaling the $92 million cited previously. Taking a look at our overall net loss on a reported basis, which includes all fair value adjustments for biological asset accounting as well as the non-cash $1.2 billion Fair Value Adjustment related to the extinguishment of warrants discussed above was $1.3 billion or $3.70 per share. I'd like to now turn to the balance sheet. At June 30, 2019, we had cash and cash equivalents available in marketing securities on hand, totaling $3.1 billion, representing a decrease of $1.4 billion from March 31, 2019. The primary use of cash during the quarter was for the C3 and This Works acquisitions, totaling approximately $430 million. The premium paid for the acreage call option, which was $395 million in Canadian dollars, and capital spending for infrastructure, which was $212 million. And the balance was related to ongoing debt servicing and funding for operational losses. Finally, I would like to provide an update on the priorities that I covered during our last call. One of my key priorities for the company is to strengthen our financial reporting and controls. And this includes everything from mitigating our material weakness on end user computing that is covered in our MD&A to reengineering our financial close and reporting processes so that we can better support the business with reporting and analytics. while also speeding up our external reporting process in anticipation that we will someday be an accelerated SEC pilot. I'm happy to report that all of these projects are underway, that we're fully resourced, and our project plans are in place, and we expect to make tremendous progress in coming months. I also mentioned my desire to revisit our ERP strategy, and this work is also underway. I will provide a much more detailed update on Q2 earnings call. On our Q2 Learnings call, I will also share more about the outcome of our upcoming foreign private issuer test, which will help to solidify our plans for conversion to U.S. GAAP at the end of FY20. For now, this concludes my review of Canopy's financials for the first quarter of 2020, and would like to field questions from analysts on the call.